British International Investment Anchors Landmark $1 Billion Allianz Climate Fund with 40% Africa Focus

British International Investment (BII), the United Kingdom’s development finance institution and impact investor, announced on January 20, 2026, that it will serve as an anchor investor in the Allianz Credit Emerging Markets (ACE) fund, a groundbreaking $1 billion blended finance vehicle designed to accelerate climate finance in emerging markets. The fund, which launched in London, represents a significant milestone in efforts to mobilize private capital for climate action in the world’s most vulnerable regions.

The ACE fund is structured to channel approximately 40% of its disbursements to Africa, with the remainder distributed across emerging economies in other regions including Asia, Latin America, and the Caribbean. BII will contribute $40 million to the fund’s junior tranche, joining a coalition of development finance institutions and multilateral development banks that collectively provide $150 million in concessionary capital to reduce investment risks for private sector participants.

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Innovative Blended Finance Structure Attracts Diverse Investor Base

The Allianz Credit Emerging Markets fund employs an innovative blended finance architecture that brings together public and private institutions to address the persistent challenge of insufficient climate finance in developing economies. Development finance institutions will provide $150 million of concessionary capital for the fund’s junior tranche, significantly reducing volatility and supporting return expectations for private investors who are expected to contribute up to $850 million if the fund reaches its $1 billion target.

At its first close, the fund has already secured $690 million in commitments, demonstrating robust investor appetite for structured climate finance vehicles in emerging markets. Allianz SE and Swiss pension fund GastroSocial Pensionskasse serve as anchor investors for the senior tranche, providing a solid foundation of institutional capital. The fund is managed by Allianz Global Investors, one of the world’s leading active investment managers with over 600 investment professionals globally.

Beyond BII’s $40 million commitment, the junior tranche includes contributions from Global Affairs Canada, the development agency of Canada, the Inter-American Development Bank Invest, the Swedish International Development Cooperation Agency, and Impact Fund Denmark. This diverse partnership reflects growing recognition among bilateral and multilateral institutions that traditional approaches to development finance must evolve to meet the scale of climate and development challenges facing emerging economies.

Strategic Focus on High-Impact Climate Sectors

The ACE fund will direct investments across a range of sectors critical to climate mitigation and adaptation, including renewable power, clean transportation, agriculture, and financial services. This sectoral diversity reflects the multifaceted nature of the climate challenge in emerging markets, where energy access, food security, and sustainable economic development are inextricably linked to climate resilience.

Renewable energy projects will constitute a substantial portion of the fund’s portfolio, addressing the dual imperatives of expanding electricity access and reducing greenhouse gas emissions. Africa, where approximately 600 million people lack access to electricity, represents a critical focus area for these investments. Clean transportation initiatives will support the transition away from fossil fuel-dependent mobility systems, while agricultural investments will enhance climate resilience and food security in vulnerable rural communities.

The financial services component of the fund’s strategy recognizes that climate finance cannot succeed without robust local financial intermediaries capable of channeling capital to businesses and projects on the ground. By strengthening financial institutions in emerging markets, the fund aims to create lasting infrastructure for continued climate investment beyond the fund’s own lifecycle.

Addressing the Climate Finance Gap in Emerging Markets

The launch of the ACE fund comes against a backdrop of stark financing disparities that threaten global climate goals. Emerging and developing economies require at least $2.4 trillion annually until 2030 to meet their climate objectives, yet currently receive only a fraction of necessary funds. The climate finance gap for developing countries alone is estimated at approximately $3 trillion, with Africa accounting for just 2% of global clean energy investment despite representing 20% of the world’s population.

Blended finance structures like the ACE fund have emerged as critical tools to address this shortfall by using public and philanthropic capital to de-risk investments and mobilize significantly larger volumes of private sector funding. The approach has demonstrated growing effectiveness, with private sector capital flows to climate blended finance deals growing by nearly 200% in 2023, and the emergence of multiple “whale deals” exceeding $1 billion signaling the maturation of the market.

Recent data from Convergence, the global network for blended finance, shows that since 2022, private investors have committed $14.6 billion to climate blended finance transactions, representing 31% of total commitments over the past three years. However, despite this progress, these volumes remain infinitesimal by private sector standards, underscoring the need for scaled-up efforts like the Allianz fund.

BII’s Strategic Evolution Under New Leadership

The ACE fund investment represents one of the first major initiatives under the leadership of Leslie Maasdorp, who joined BII as Chief Executive in late 2024. Maasdorp, a South African national with extensive experience across development finance, brings a unique perspective shaped by nine years as Vice-President and Chief Financial Officer of the New Development Bank, the multilateral development bank established by BRICS nations.

Speaking about the fund announcement, Maasdorp emphasized the strategic imperative of using scarce concessionary capital to unlock private finance. “At BII we recognise that we must use our scarce concessionary capital to unlock the vast pools of private finance that is required to meet the global challenge of the climate emergency and drive sustainable, impact-led growth in some of the least developed countries in the world,” he stated. “Today’s announcement is another milestone for BII in achieving that key objective.”

Maasdorp has outlined four strategic priorities for BII: climate finance, private capital mobilization, enhanced cooperation with other development finance institutions and multilateral development banks, and innovation in development finance approaches. The ACE fund investment aligns directly with these priorities, combining climate focus with catalytic capital deployment designed to attract multiples of private investment. BII has set ambitious targets to devote at least 30% of its commitments to climate finance annually between 2022-2026, and exceeded this goal in 2024 with 41% of commitments directed to climate-related projects.

Prior to joining BII, Maasdorp held senior positions at leading global financial institutions including serving as International Advisor to Goldman Sachs, Vice Chairman of Barclays Capital, and President of Bank of America Merrill Lynch in South Africa. His appointment reflects BII’s commitment to deepening its engagement with African and Asian markets, where approximately 60% of BII’s portfolio is concentrated.

Allianz’s Growing Climate Finance Portfolio

For Allianz Global Investors, the ACE fund builds on a substantial track record in climate and infrastructure finance in emerging markets. Allianz has been a pioneer in blended finance structures, notably through the Emerging Markets Climate Action Fund (EMCAF), created in partnership with the European Investment Bank and launched at COP26 in Glasgow in November 2021.

EMCAF reached its final close at €450 million in January 2025 and is expected to mobilize up to €7.5 billion in climate finance across emerging and developing markets. The fund has already invested $100 million across Africa, Asia, and Latin America in renewable energy, sustainable mobility, and green infrastructure, achieving early impact including the reduction of approximately 800,000 metric tons of greenhouse gas emissions.

Edouard Jozan, Head of Private Markets at Allianz Global Investors, emphasized the urgency of mobilizing capital for emerging markets. “Addressing climate change cannot be focused solely on investing in developed markets – launching ACE is a bold step forward in mobilising institutional capital to address global development priorities including climate,” he stated. The ACE fund represents an evolution of Allianz’s approach, expanding from the equity-focused EMCAF structure to credit instruments that can support a broader range of climate projects and financial intermediaries.

Allianz’s commitment to emerging markets climate finance extends beyond individual funds. The company has published comprehensive analyses highlighting that Africa will require approximately $7 trillion in energy system investments between 2020 and 2050 to achieve net-zero emissions, with $200 billion needed annually by 2030 rising to $370 billion per year by 2050. These figures underscore the transformative scale of investment required and the critical role that blended finance vehicles must play in bridging the gap between current flows and future needs.

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Policy Context and Government Support

The British government has signaled strong support for BII’s evolving approach to development finance. Baroness Chapman, UK Minister for International Development and Africa, stated: “BII’s participation in the ACE fund demonstrates how we are modernising our approach to international development, by working as partners and investors. This approach helps Britain too, boosting growth, bringing in investment and returns for UK taxpayers and positions us as a key hub for helping emerging economies.”

This statement reflects a broader shift in development finance philosophy, moving away from traditional grant-based aid toward investment-led models that seek to catalyze private capital while generating financial returns that can be recycled into future development activities. The approach has gained traction globally as donor countries face fiscal constraints while development needs continue to expand.

The ACE fund aligns with recent innovations in development finance structuring documented by BII and Boston Consulting Group in their April 2025 guidance on scaling blended finance. That research identified five archetypes of blended finance structures and developed a scorecard for assessing fund design, drawing on consultations with major concessional capital providers managing over $30 billion, impact investors with more than $100 billion in assets under management, and global asset managers controlling over $800 billion in alternative investments.

Regional Investment Priorities and Development Impact

The fund’s commitment to directing 40% of disbursements to Africa addresses a continent facing acute climate vulnerability while holding enormous renewable energy potential. Sub-Saharan Africa experiences some of the world’s most severe climate impacts, from prolonged droughts affecting agricultural productivity to increasingly intense tropical cyclones threatening coastal communities and infrastructure. Yet the region possesses abundant solar, wind, hydro, and geothermal resources that remain largely untapped due to financing constraints and project development challenges.

BII has identified energy access as a top priority, given that 80% of people globally without electricity reside in Africa. The institution participates in Mission 300, an initiative led by the World Bank and African Development Bank to electrify 300 million households across the continent. The ACE fund’s renewable power investments will directly support this goal while contributing to emissions reduction objectives.

Beyond energy, infrastructure development represents a critical bottleneck to African economic transformation. Poor road networks, inadequate port facilities, and limited digital connectivity constrain trade, increase business costs, and limit opportunities for economic diversification. Climate-resilient infrastructure investments that can withstand increasing temperatures, changing rainfall patterns, and more extreme weather events are particularly crucial for long-term development.

In Asia, where the ACE fund will deploy significant capital, climate finance needs are similarly acute. The region faces rising sea levels threatening densely populated coastal areas, changing monsoon patterns affecting hundreds of millions of farmers, and growing water stress in major river systems. Countries including India, Indonesia, Vietnam, and Bangladesh require massive investments in renewable energy, climate-smart agriculture, water management infrastructure, and urban resilience to achieve development goals while limiting emissions growth.

Challenges and Risk Mitigation Strategies

Despite the promise of blended finance structures like the ACE fund, significant challenges remain in deploying climate capital effectively in emerging markets. Political instability, weak regulatory frameworks, currency volatility, and limited local financial market depth create risks that deter many institutional investors, regardless of potential returns or impact.

The fund’s layered structure addresses these concerns through multiple mechanisms. The $150 million junior tranche absorbs first losses, protecting senior investors from initial portfolio deterioration. This credit enhancement effectively improves the risk-return profile for commercial investors, making emerging market climate projects accessible to pension funds, insurance companies, and other institutional investors with fiduciary duties and risk constraints.

Allianz Global Investors’ expertise in emerging markets, developed through vehicles like EMCAF, provides additional risk mitigation through rigorous due diligence, active portfolio management, and deep understanding of local contexts. The firm’s track record includes investments across multiple regions and sectors, from renewable energy projects in the Middle East and North Africa to cold chain infrastructure in East Africa addressing post-harvest food loss.

The participation of multilateral development banks and bilateral development finance institutions brings not only capital but also technical assistance, policy dialogue capabilities, and convening power to address systemic barriers to investment. These institutions can work with national governments to improve regulatory frameworks, streamline project approvals, and strengthen local financial sectors – creating more favorable ecosystems for private investment beyond individual fund activities.

Market Context and Competitive Landscape

The ACE fund enters a rapidly evolving market for climate finance in emerging markets, characterized by growing sophistication but persistent scale challenges. Recent years have seen the emergence of several large blended finance vehicles, each testing different structural approaches and sectoral focuses.

Climate Fund Managers’ Climate Investor Two fund closed at $1.065 billion in October 2025, becoming the largest climate adaptation infrastructure fund focused on emerging markets. That fund targets water services, sanitation, waste management, and ecosystem restoration – sectors that have historically struggled to attract commercial capital despite their critical importance for climate resilience.

The International Finance Corporation has committed over $4.4 billion in blended finance from fiscal year 2018 to 2025 to support more than 505 high-impact projects. These commitments span diverse sectors and geographies, demonstrating that blended finance can work across different contexts when properly structured.

The Global Innovation Lab for Climate Finance recently endorsed nine innovative solutions targeting $425 million in capital using tools including parametric insurance, carbon credits, and structured equity to manage risk and unlock private investment. These initiatives reflect ongoing experimentation with financial engineering approaches to address persistent barriers to climate investment in frontier markets.

Looking Ahead: Path to Final Close and Future Impact

With $690 million already committed at first close, the ACE fund is well-positioned to reach its $1 billion target through subsequent fundraising rounds. If successful, it would rank among the largest blended finance vehicles created to date, joining an elite group of climate finance funds operating at transformational scale.

The fund’s success will ultimately be measured not just by capital deployed but by tangible development and climate outcomes on the ground. Key performance indicators will likely include greenhouse gas emissions avoided or reduced, megawatts of renewable energy capacity installed, number of people gaining access to electricity or clean transportation, agricultural productivity improvements, and financial institutions strengthened to continue channeling climate finance.

For BII, the ACE investment demonstrates the institution’s commitment to what Maasdorp has described as becoming a “laboratory of ideas” for development finance innovation. The organization has launched initiatives working with private asset managers, pension funds, and sovereign wealth funds to identify exactly what forms of concessional funding and risk mitigation they require to invest alongside development finance institutions in climate projects.

This collaborative approach reflects growing recognition across the development finance community that mobilizing private capital at the scale required for climate and development goals demands deep understanding of private sector investment processes, constraints, and requirements. Traditional development finance institutions cannot simply expect private investors to follow their lead; they must actively co-create investment structures that work for all parties.

Broader Implications for Development Finance Architecture

The ACE fund represents more than a single investment vehicle; it embodies evolving thinking about how development finance institutions should deploy their scarce concessional resources for maximum catalytic effect. Rather than making direct investments that might crowd out private capital, institutions like BII are increasingly positioning themselves as market makers and risk absorbers that enable private investment to flow into sectors and geographies it would otherwise avoid.

This evolution responds to the stark reality that official development assistance and development finance institution balance sheets, while substantial, fall far short of the multitrillion-dollar annual investment requirements for achieving the Sustainable Development Goals and Paris Agreement objectives in emerging economies. The International Monetary Fund has emphasized that combining public and private capital offers unique advantages by reducing investment risk and attracting greater funding than either sector could achieve alone.

Multilateral development banks have begun fundamentally rethinking their business models, balance sheet optimization, and risk appetite to increase lending capacity and mobilization ratios. The ACE fund and similar vehicles demonstrate how bilateral development finance institutions like BII can leverage their capital through carefully structured blended finance approaches that de-risk transactions while maintaining development impact integrity.

As climate impacts intensify and development financing gaps widen, the innovations embedded in the ACE fund structure – layered capital stacks, diverse investor coalitions, credit enhancement mechanisms, and sectoral diversification – will likely influence the design of future climate finance vehicles. The success or challenges encountered by this fund will provide valuable lessons for the broader development finance community seeking to scale climate action in the world’s most vulnerable regions.

The $1 billion Allianz Credit Emerging Markets fund, anchored by British International Investment’s $40 million commitment, represents both a significant milestone and a modest down payment on the transformative investment required to address the climate emergency in emerging markets. Whether this and similar vehicles can demonstrate sufficient impact and returns to catalyze the exponential growth in private climate finance that the world urgently needs remains to be seen. What is clear is that incremental approaches will no longer suffice – only bold innovation in development finance architecture can hope to bridge the vast gap between current investment flows and what the planet requires.

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By: Montel Kamau

Serrari Financial Analyst

21st January, 2026